Huckabee and the Fair Tax

There is a lot of criticism going around about Mike Huckabee’s Fair Tax. Right off the bat, let’s get one thing straight. Mike Huckabee did not conceive the Fair Tax, but according to him, he wishes he had came up with the idea. You can go to the Fair Tax website to find out more, but it basically does away with the current tax code and puts a 23% (not 30%) national sales tax on all new good and services. Used goods would be exempt.

Now, I can not pretend to debate all the nuances of the Fair Tax and all the pros and cons of the plan, but let me address a couple of articles that have been floating around, criticizing the Fair Tax. First, Rudy Giuliani has said:

Giuliani, who was campaigning in Greensboro, N.C. on Monday, said Huckabee’s plan would be detrimental to home buyers who have come to rely on the home mortgage deduction each year as a tax break. Under the Huckabee “fair tax” proposal taxes on income and investments would be eliminated while federal sales tax would increase significantly.

By eliminating taxes on income and investments the “fair tax” would also eliminate the tax deductions that went with them. Giuliani noted, “The home mortgage deduction is considered by many critical to the ability of people to buy a home and keep their home.” In addition to eliminating home mortgage deductions, the “fair tax” would also be the end of deductions for charitable contributions.

Giuliani doubted the viability of such a plan and said “Why waste our time trying to do this if we can’t actually accomplish it? I try to put my time into things that we can actually accomplish.”

To start with, yes, the home mortgage deduction would be eliminated, but the tax code requiring such a deduction would be gone as well. No income tax equals no deductions necessary. I’m not a real smart fella, but that looks pretty plain to me.

As a political matter, the fair tax would offer a bull’s-eye for Democrats, who would love to run against a plan that would instantly make most purchases 30% more expensive. Though the fair tax includes a complicated rebate system to shield the working poor, a levy on consumption would nonetheless hit hard the young, middle-income families that Mr. Huckabee is courting. It would also tax medical services and home prices, sure to be flashpoints this election season in particular.

The above statement is simply not true. The prices we all pay for new goods and services are already inflated by around 23%, due to the taxes businesses and corporations have to pay. They simply pass them on the you and I, the consumer. The price of new goods and services would remain basically the same, since those taxes would be eliminated. Not only that, but just think about it. We would receive our entire paycheck with which to pay for what we need. Sounds like a plan to me.

Another criticism of the Fair Tax is how it will be hard for the families below the poverty line to pay this tax. The thing most of these articles fail to mention is that every legal household in America will receive a prebate check in the mail every month, which would eliminate the tax on the basic necessities of life. A family of four would received around $500.00 per month.

I urge you again, please visit the Fair Tax website. Do your own research and come to your own conclusions, but please do not take these negative articles at face value. That is the worst thing you can do. Give Mike Huckabee and the Fair Tax a fair break. It’s clear, our government and it’s tax system is not working and most certainly, is not fair. Maybe it’s time to give someone else with another plan a chance to help our country.

That’s my take!

Larry

About LD Jackson

LD Jackson has written 2048 posts in this blog.

Founder and author of the political and news commentary blog Political Realities. I have always loved to write, but never have I felt my writing was more important than in this present day. If I have changed one mind or impressed one American about the direction our country is headed, then I will consider my endeavors a success. I take the tag line on this blog very seriously. Above all else, in search of the truth.

The criticism by the Wall Street Journal is especially poor … a business-based newspaper should know better. By eliminating the various taxes along the way, prices are reduced. That they pretend not to know this is actually shocking. I try not to jump at accusations of bias, but sometimes the shoe fits.

Hank Van Gieson

What is shocking is that both of you don’t seem to understand that the embedded costs of the income tax system include employee payroll and income tax withholding. In order for the Fairtax to be offset by the removal of all embedded costs, you will have to accept a gross pay cut down to your current net. And that, my friends, isn’t going to happen for fairness and contractual reasons.

So, the best you could hope for would be for businesses to reduce their costs by 10%, including the elimination of income tax compliance costs, and prices at the cash register will rise by an average of 17%. (1.00 x .9 x 1.3 = 1.17).

The writer didn’t get it right either, but he was closer to the truth than you two.

You need to do some more Fairtax homework before you unload on critics!

http://www.hucksarmy.com Christian

Actually, Laffer assumes at minimum a 12% drop in prices even while our gross pay becomes our net. You are quoting the Jorgenson study, but forgetting also that he didn’t include compliance costs as a price factor which will, when remove, push prices lower than even he suggested.
So yes, after FairTax prices will potentially increase, but we’ll have our full paycheck, and thus it is offset. Correct Hank that the FairTax doesn’t offer “free money”, but spending power remains the same and the system is greatly more efficient than the current nightmare.

http://myviewmytake.wordpress.com/ Larry

Thanks, Christian. I am not sure how to answer some of the Fair Tax questions and I appreciate the help.

Dave

I am not an expert in the fair tax but here are a few of my thoughts:

1. KISS (keep it simple, stupid). Current tax code = KISS? In my opinion it has gotten WAY out of control. Just the costs to administer it are enormous, I am sure. Also I believe the people with the most money will ALWAYS find ways to avoid playing “fair”.

2. For a long time, this country has suffered from “affluenza”. Our culture and financial institutions strongly motivate people to buy tons of “stuff” that they shouldn’t. People should be incented to spend their money on things of real value (e.g. a house) and less on things that provide (very) temporary happiness. Affluenza is killing us and the planet. I believe the fair tax will help with this.

http://myviewmytake.wordpress.com/ Larry

Dave,

You may not be an expert and I certainly am not, but you are so correct. The current tax code is not simple and I believe is one of the biggest burdens on our economy and on our people.

I have not heard before that our country is suffering from “affluenza” before, but I believe you are right. Families are encouraged to spend lots of money and buy a lot of stuff that they shouldn’t. I have been guilty of that myself. It has gotten me into trouble before and I believe it is getting a lot of other people in trouble as well. Good points.

FairTaxNow

First I will say IMHO the Fair Tax is our best chance to save our economy. I will cover just a few of the numerous benefits I see in the FT but I would encourage you to take a look at the large and comprehensive study done by the Beacon Hill Institute at http://www.beaconhill.org/FairTaxPapers.htm some leading economist participated in this study including Laurence Kotlikoff.
The Fair tax would:
1. Allow workers to recieve their pay check without federal confiscatory taxes being withheld.
2. Be the biggest transfer of power from the govt. back to the people in the history of our country. No one would argue that lobbyist have an undue level of influence on our legislators. They have created a tax code that exceeds 65,000 pages by getting various legislators to push some convenient changes into the code for the people that pay them very large salaries. The FT would cut the legs out from under these political prostitutes by taking away the code and replacing it with a simple consumption tax visible on your retail sales receipt
3. Remove the 250 billion plus cost to the american people and businesses each year just to comply with this intrusive monster.
4. Increase the tax base by turning drug dealers, prostitutes, and illegal aliens into tax payers. These folks who currently are under the IRS radar would now pay into our tax system each time they spend their ilgotten gains. Also worth mentioning is the millions of tourist that come to our country each year these people would now also be paying into our system and helping support our social security, medicare, etc. each time they spend money on our soil. All of these people would pay the tax without recieving the prebate. Only legal citizens based on number of people in the household will recieve the prebate to cover the tax that will be paid each month for essential goods and services up to the poverty level.
5. Turn America into the tax haven of the world as corporate taxes would be gone. This would also through business competition cause the imbedded tax that is being passed onto us by the corporations to cover their tax costs to drop from the price of new product purchases. Note: used products will have no sales tax.Tthe removal of corporate taxes will have our own companies returning and foreign companies moving here bringing with them jobs and more jobs.
6. Save social security, currently retirees start drawing from money being provided by a shrinking number of those still employed. Under the FT everyone pays the tax when they purchase a new item including retirees. It is important to note that retirees that have put money into various tax sheltered accounts and will have to draw that money out a little at a time to avoid heavy taxation can now go and take that money totally out with no tax consequence and don’t forget the prebate each month. Spending is much more stable as a source of revenue than income.
These are just a few things that I love about the FT please do your own research and come up with even more benefits to post!